The Honda Effect

March 25, 2018 Business

INTRODUCTION The two reports are based on Honda’s entry onto the US. They are The BCG report, which was commissioned by the British government to investigate the decline of the British motorcycle industry, and the second report was recorded by Richard Pascale, which looked at Honda’s entry into the US Market. Honda is a Japan based company and is the world’s largest manufacturer of motorcycles as well as the world’s manufacturer of internal combustion engines (motor vehicles) producing more than 14 million internal combustion engines each year.

Honda’s trademark had been registered in Japan since November 13, 1953 it was not until a decade later that the motorcycle and automobile company filed for trademark registration in the United States. Honda is headquartered in Minato, Tokyo, Japan. Their shares trade on the Tokyo Stock Exchange and the New York Stock Exchange, as well as exchange in Osaka, London, Paris and Switzerland just to name a few. Honda’s global line up consists of the Fit, Civic, Accord, Insight, CR-V, Odyssey and S2000.

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An early proponent of developing vehicles to cater to different needs and markets worldwide, Honda’s lineup varies by country and may feature vehicles exclusive to that region. (www. wikipedia. com) 1What are the key differences between these two accounts of Honda’s entry in the US motorcycle market? According to the two reports, BCG and Pascale, there are seven differences in the way Honda entered the US motorcycle market, the seven differences are tabulated below:

BCG ReportPASCALE Report This report focused on changing the bad image that motorcycles had, by getting rid of the stereotype that motorcyclists were leather-jacketed teenage troublemakers. This report focused on attaining 10% of the import market thus competing with European exports. According to this report Honda started its push in the US Market with the smaller lightweight motorcyclesIn this report, Honda pushed into the US market by introducing the larger machines, i. e. he 250cc and 350cc In this report it states; Honda’s selling point for the lightweight motorcycle was its three-speed transmission, an automatic clutch, five horsepower (the American motorcycles only had two and half), an electric starter and step through frame for female riders. According to Pascale’s report, the heavy larger motorcycles’ selling point was the shape of the handlebar, which looked like the eyebrow of the Buddha, which Mr Honda felt would be a strong selling mechanism.

In this report; Honda established an American subsidiary in 1959- an American Honda Motor Company, different to foreign producers who relied on distributorsIn this Report, Honda chose to establish in Los Angeles because it had a large second and third generation Japanese community, a climate suitable for motorcycle use and a growing population. This report states that Honda followed a policy of developing the market region by region. According to Pascale Honda followed a policy of going directly to retailers.

In this report, Honda started doing the West Coast region where they lined up 125 distributors and spent $150 000 on advertising. In Pascale’s report it is stated that; Honda ran ads in motorcycle trade magazines for dealers. By spring 1960 they had 40 dealers who had their inventory in their stores. According to the BCG report, Honda’s advertising was directed to young families and their theme was ‘Meet the Nicest People on a Honda’Pascale’s report states that Honda’s advertising was directed to the macho, tough and rough market

Even though these two accounts had the same underlying reason for their draft, to establish Honda’s entry into the US market, they had a lot of differences in the way they went about it. 2To what extent was Honda’s apparent strategy deliberate and/or emergent? Yes the strategies were both deliberate, and emergent. Strategies can be viewed as patterns or paths to be followed in an organization and therefore sometimes the paths or patterns do not always turn out like it had been oped, therefore alternative routes or patterns need to traveled or followed in order to reach the desired destination or goal. Deliberate strategies can be seen as the ‘intended’ pattern or path, before it is realized, or before the journey takes place and, the Emergent strategies are patterns that are realized despite or in absence of the intended path or pattern. Emergent strategies are rather common in an organization, or more to the point. (www. jstor. org)

According to Pascale’s report, Honda had two incidents where emergent strategies had to be implemented; they were first not aware that the motorcycle business in the United States occurs during a seasonable April-August window and their timing coincided with the closing of the 1959 season, therefore they had to come up with an alternative plan and that was to try go to retailers direct. Again in Pascale’s report Honda had another emergent strategy that had to be implement fast. When their larger bikes started breaking and leaking oil causing clutch failure. Honda’s reputation was destroyed before it could be established.

It turned out that motorcycles in the United States were driven much farther than in Japan. As they were busy sending their machines back to their factory to be fixed, they were running errands around Los Angeles in Honda 50cc motorcycles, which they had initially decided not push because the market they were hoping to attract was macho, to they surprise, the lightweight motorcycles attracted a lot of attention. So they had no choice but to push the 50cc motorcycles into the US market and the reception was phenomenal to the extent that retailers who wanted them were not even motorcycle dealers but sporting goods stores.

The BCG states that Honda had a number of deliberate strategies which it went ahead with, without any glitches for instance, they intended to enter the US market with the lightweight motorcycles and it was a success, and their sole objective was to change the ugly macho image that motorcycles had and it did just that. In the United States motorcycles were driven by rowdies who went around in big machines like the Harley-Davidson, Triumph and Norton, leather jackets and called themselves gruesome names like; Hells Angels or Satan’s Slaves.

So decent people were not attracted to motorcycles. When Honda came along with the lightweight motorcycles and followed the theme ‘Meet the Nicest People on a Honda’, their concept changed a lot of peoples’ perspective on motorcycles. 3What key lessons may be learned from any comparison of these two quite different accounts of the same strategic decision? I have discovered three lessons to be learnt from these two accounts, and my lessons are stated below: Planning is essential when considering embarking on a business expansion, especially going to start up in another country.

If one looks at the Boston Consulting group report, they had a solid and viable plan, to do advertising as per region and to stick to their plan to change the image of the motorcycle industry and it was a success, instead of just having a gut feeling that something will work without planning ahead. For instance in Richard Pascale’s observation, Honda just saw that out of the 450 000 motorcycle registrations in the US only 60 000 motorcycles were imported from Europe each year, so they ‘imagined’ they could shoot for 10% of the import market yet they had no strategy nor a plan in place.

It is necessary to do a thorough feasibility study of the location wishing to expand to, in order to avoid problems. In Pascale report, Honda took for granted that the heavy machines they used in Japan will work in the US without considering that in the US the machines will be traveling farther distances than in Japan. This lack of planning caused them a dent in their reputation before they had even established themselves. It is better to be unique and introduce a product or service that the market is not used to.

In the BCG report Honda decided to introduce the lightweight motorcycles to the US market as they were previously used to heavy machines by the likes of Harley-Davidson. So the market had never had the experience of lightweight motorcycles so it was new and unique to them, and the idea they had – worked. In Pascales report Honda decided to stick to what the market in the United States was used to and that was the heavy machines because it wanted to maintain the macho image the motorcycle industry already had, and that did not work out as they had hoped.

CONCLUSION Honda saw an opportunity to introduce motorcycles in the US and acted on it. The US only relied on heavy machines that were produced by: Harley Davidson of USA, Norton of UK and Moto-Guzzi of Italy. Honda also realized that in the US motorcycles had a bad image, they were regarded as big and macho and were driven by wild rowdy teenagers who whore black leather garments that formulated groups and called themselves names like Hell’s Angels or Satan’s Slaves.

Honda’s mission was to change that image by introducing various types of motorcycles that came out in different sizes so as to cater for females and the less rowdy markets. Honda transformed the US market and converted them from automobiles to driving in motorcycles on a day-to-day basis. References and bibliography: (www. wikipedia. com) (www. jstor. org) R Pascale, 1996 Mintzberg et. al, 2003, The Strategy Process, 4th edition, Prentice Hall Gerry et. Al ,2008, Exploring Corporate Strategy, 8th edition Prentice Hall

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